Vindel L. Kerr, Contributor 
Kerr
IN TODAY'S globalised environment, it is absolutely necessary for Caribbean businesses to cover not one or a few, but as many possible business risk eventualities those easily perceived and predictable and those events that can only be determined through thorough and rigorous forecasting and estimation.
Enterprise risk management (ERM) represents a fundamental shift in the way businesses must approach risk management.
It is really a comprehensive and integrated framework for managing credit risk, market risk, operational risk, economic capital, and risk transfer to maximise firm value.
In many more advanced countries, a growing number of organisations have been adopting ERM under the leadership of a chief risk officer.
NO LONGER A BLIND EYE
As the Caribbean economies become more service driven and CSM-oriented, businesses will no longer be able to turn a blind eye to events that have been determined or perceived to pose potential threats to the sustainability of their businesses.
Some of these risks are newly-recruited human resources, domestic and foreign; dwindling distribution channels, corporate gover-nance and boardroom risks; unprecedented reliance on information technology; risk transfer when occurring at enterprise level such as hedging in derivatives and other relatively new financial products; countless fluc-tuations; and countless others that businesses will now have to grapple with.
Since early 2002, Sarbarnes Oxley (United States) and new banking regulations (Jamaica) have become the driving forces for organisations (mainly financial institutions) and a growing number of other industries to implement internal financial controls to avoid the negative publicity surrounding scandals such as Enron, Worldcom or Jamaica's financial meltdown of the 1990s.
It is only recently that the guidelines on the implementation of a consistent ERM framework has been provided through the Commission of Sponsoring Organizations of the Treadway Commission (COSO). The framework seeks to define and explain ERM and provides a standard against which businesses can assess their ERM progress and determine how to improve it.
Dr. Robert M. Mark, one of the world's leading risk management professionals who has had the distinction of being nominated and awarded Financial Risk Manager of the year 1999, will be in Jamaica on the 10th -11th of February to present the Caribbean's first comprehensive ERM workshop. Other speakers will explore key components of ERM, which takes care of risks across the entire organisation and business functional areas and in different industries.
Specifically, and as is required in any sound risk management plan, key elements to address will include risk strategy, risk ownership, risk identification, risk ranking, risk treatment and risk solutions. These five components serve as the precursors or basic elements to launching a sound risk management strategy.
At least few local companies such as GraceKennedy, National Housing Trust, Jamaica Money Market Brokers Limited and a few others have either started to think, or in the process of implementing an ERM programme to manage contemporary and conventional risks. ERM is becoming almost fashionable for most successful companies.
These are top companies which are seeking ways to cut cost, improve margins, size, greater market share, build stronger loyalty and investor confidence and to manage an unforeseen future risks and opportunities.
In part two, next week, we explain some of the future directions of ERM such as the Role of the Chief Risk Officer, the Audit Committee, Economic Capital, Risk Transfer, Advanced Technology and others.
Vindel L. Kerr is CEO of GovStrat Limited. He may be contacted at 960-5356.
